Whitbread Agrees to Split Coffee Shops From Hotels

Sam Chambers, Bloomberg

- Apr 25, 2018 6:00 am

Skift Take

While the Whitbread CEO had previously said the company was open-minded about a breakup, it does look like the pressure applied by activist investors has done the trick. It will be interesting to see whether the split facilitates the international expansion of the Premier Inn brand.

— Patrick Whyte

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Whitbread Plc plans to spin off the Costa coffee-shop chain, yielding to activist investors who pushed for a breakup of the company that also owns the Premier Inn hotel business.

The split will be done as quickly as possible and should be completed in 24 months, the Dunstable, England-based company said Wednesday in a statement. Whitbread will continue to own Premier Inn, the company said.

“For some time, the board has been of the view that at the right time Premier Inn and Costa should be independent companies,” Chairman Adam Crozier said in the statement. “A separation will provide enhanced focus for each business and give shareholders an investment in two high-quality businesses.”

During Chief Executive Officer Alison Brittain’s more than two years at the helm, the company has shrunk or exited ventures in India, Thailand and Singapore while focusing on fast-growing markets such as China. The stock price has been boosted by U.S. activist investors Sachem Head and Elliott Management buying stakes in the company. Sachem founder Scott Ferguson said he wanted to see the company spin off Costa, while Elliott presented management with a plan for a demerger, according to a person familiar with the matter.

Whitbread’s Costa business could be valued at 2.39 billion pounds ($3.3 billion), according to the median estimate of nine analysts surveyed by Bloomberg News.

Also on Wednesday, Whitbread reported adjusted pretax profit for the full year that beat the highest analyst estimate. Costa’s U.K. like-for-like sales fell by 0.4 percent last year, however, down from growth of 2 percent in the prior year. The company cited dwindling foot traffic on the U.K.’s downtown shopping streets, where many of its cafes are located.